HB011023 - Horizon Issue 3 2018 - v04 FINAL WEB PDF

HORIZONS
MERGERS&ACQUISITIONS ISSUE 3 | 2018
MALAYSIA
CHANGE OF GOVERNMENT
SIGNALS NEW HORIZONS
REGIONAL VIEW SECTOR VIEW
VIEWS FROM RENEWABLES

AROUND THE GLOBE REAL ESTATE
RETAIL
CONTENTS
GLOBAL VIEW........................................................ 01
FEATURE: MALAYSIA - CHANGE OF
GOVERNMENT SIGNALS NEW HORIZONS....03
GLOBAL MAP......................................................... 05
REGIONAL VIEW................................................... 07
SECTOR VIEW........................................................ 35
WELCOME
WELCOME TO THE THIRD BDO HORIZONS OF 2018, IN WHICH OUR M&A PROFESSIONALS REVIEW
THE PAST QUARTER AND ANALYSE WHAT LIES AHEAD
In our first HORIZONS issue of INSIGHTS FROM A LEADING M&A ADVISER

the year, we mentioned that
the conditions for 2018 being a Looking back on Q2 2018, we have to conclude that M&A activity, in our mid-market
transitional year in M&A were intact. sample, has not yet recovered from a weak first quarter. On the contrary, the downtrend
This statement was based on, among in global deal volume decreased from an already low level in Q1 2018 (1,907 transactions
other things, lower economic and amounting to USD 165.2bn) to 1,782 transactions in Q2 2018 with a value of USD 157.8bn.
political risks. M&A activity in Q2 2018 represented a further fall of 6.55% in terms of deal volume and
4.5% in deal value. Similarly low figures of deal volume can last be found in Q3 2015, when
Even though the first quarter of the some 1,658 transactions worth USD 134.5bn were registered.
year, which is generally weaker for M&A
activity than the quarters that lie ahead, The global downtrend in the first half of 2018 is very significant and suggests that 2017’s
saw below average performances, now figures will now be out of reach and that 2017 might signify a turning point for global
that we reached the first half of 2018, we M&A activity.
must conclude that 2018 might not end As can be seen in our BDO Global Heat Chart, the total of companies officially, or rumoured
up being the expected transitional year. to be for sale, is virtually unchanged at 8,287, which is still at a high level. The held-back
It is still early and there is time to catch deals mentioned in the previous editions have not yet all come to fruition as yet, reflecting
up. However, we think that the rising the ongoing reservation of market participants.
fears of a looming trade war between
the US and China will not have a positive
impact on the current noticeably cautious
behaviour of market participants.
Nevertheless, it is still difficult to predict
to what extend an impending trade
war will affect global M&A activity in
general. It is still possible to hope that
the situation remains as posturing among SUSANA BOO
the two superpower nations. This might MAREK
INTERNATIONAL
lead us back to the necessary economic FRANKE CORPORATE FINANCE
predictability and political stability that HEAD OF GLOBAL M&A COORDINATOR
would pave the way for further and
marek.franke@bdo.ch susana.boo@bdo.co.uk
ongoing global growth.
01 HORIZONS | BDO'S GLOBAL VIEW OF MID-MARKET DEAL ACTIVITY
GLOBAL VIEW
Global M&A activity in Q2 2018 Global private equity activity remained by the Benelux (-53%), Africa (-48%) and
continued the downward trend from the remarkably high in Q1 2018, despite the South East Asia (-34%) performed worse
previous quarter, especially in terms of general downtrend, but the Q2 2018 while nine regions, led by the Nordic
deal volume. As a result, our prediction figures were weak, in line with the global (+90%), Israel (+82%) and Greater China
in our last issue that 2018’s deal volumes trend. Only 208 transactions amounting (+26%), performed better.
and values will not match 2017’s is, now to USD 24.4bn were registered, and there If we compare Q2 2018 deal value to Q2
that we have passed the first half of 2018, were 67 transactions less (-24.4%) than 2017, only CEE (+6%) and Grater China
looking more and more likely. in the previous quarter and a remarkable (+10%) performed better while the other
126 transactions less (-37.7%) than in the regions all reported weaker figures, led
In terms of global deal volume, there
same period in 2017. However, with 11.7 % again by Benelux and Africa (both -58%).
were 1,782 deals (-6.6%) registered in
of all transactions, the quota of PE firms
Q2 2018, representing a total deal value However, we always have to bear in mind
was still in the range of previous quarters.
of USD 157.8bn (-4.5%). Comparing Q2 that the deal value as well as the deal
2018 with Q2 2017’s figures, the decrease volume of North America and Greater
COMPARING HERE AND THERE
is even more significant, with 353 less China as a whole (the Q2 2018 deal value
transactions (-16.5%) and USD 22bn less As we look at M&A mid-market activity
was USD 86.5bn and the deal volume was
(-12.3%) than the same period in our 17 regions, the weaker performance
1,296 transactions) are higher than the
in 2017. in global deal activity is clearly visible in
total of all of the remaining 15 regions
both the regions and the sectors.
In fact, we have to look back put together (the Q2 2018 deal value was
five years to find lower quarterly If we have a look at the number of deals, USD 71.3bn and the deal volume was 918
figures than Q2 2018, especially apart from the Nordic (+2%), UK & transactions).
in terms of the number of deals, Ireland (+16%), Other Asia (+22%) and
Comparing sectors, it’s quickly noticeable
when Q3 2013 saw some 1,658 Greater China (+119%), all other regions
that every sector completed fewer deals
transactions amounting to USD recorded worse numbers in Q2 2018 than
than the same quarter a year ago. This
134.5bn completed. in the previous quarter. This was especially
was particularly the case in Energy,
the case in North America, which
The relative drop in deal value Mining & Utilities, which fell by 23.4%
recorded a decline of 129 transactions to
was lower than that of deal from 285 transactions in Q2 2017 to 187
432 transactions (-23%) in comparison to
volume, pointing towards transactions in Q2 2018.
Q1 2018 and a decline of 189 transactions
an ongoing trend for (-30%) when compared to the same Finally, by comparing the numbers with
bigger transactions. The period a year ago (Q2 2017). the preceding quarter, we can only see
average deal size in Q2 minimal growth in Leisure (+11.8%) and
2018 was USD 88.5m. In terms of deal value, the picture looks
in Energy, Mining & Utilities (+1.1%).
more balanced when comparing the
The sectors with the weakest growth are
numbers to Q1 2018. Eight Regions, led
Consumer (-12.7%) and TMT (-12.5%).
ISSUE 3 | 2018 02
GLOBAL BDO HEAT CHART
Financial Services
Business Services
Pharma, Medical
Pharma, Medical
Technology &
Industrials &
Real Estate
Chemicals
Consumer
& Biotech
& Biotech
Leisure
Media
TOTAL %*
North America 562 432 362 242 452 198 125 61 28 2,462 30%
China 218 320 121 132 95 60 103 42 47 1,138 14%
CEE & CIS 129 150 95 58 36 52 53 28 12 613 7%
Southern Europe 117 111 124 80 29 40 47 35 7 590 7%
South East Asia 70 75 80 69 31 44 37 36 23 465 6%
Australasia 103 74 97 71 41 71 55 28 10 550 7%
UK & Ireland 120 42 54 56 26 35 63 16 11 423 5%
Latin America 65 76 50 53 18 63 32 17 4 378 5%
DACH 53 121 41 39 23 18 25 8 3 331 4%
India 27 28 29 14 20 14 30 6 3 171 2%
Other Asia 63 87 36 12 48 11 23 13 2 295 4%
Nordics 45 32 28 27 15 14 12 9 3 185 2%
Japan 48 41 23 21 27 6 16 3 4 189 2%
Benelux 49 41 34 33 13 8 18 8 4 208 3%
Africa 10 41 11 16 5 33 22 2 4 144 2%
Israel 40 12 5 4 8 2 4 4 1 80 1%
Middle East 19 4 5 5 4 12 6 7 3 65 1%
TOTAL 1,738 1,687 1,195 932 891 681 671 323 169 8,287 100%
21% 20% 14% 11% 11% 8% 8% 4% 2% 100%
* Percentage figures are rounded up to the nearest one throughout this publication.
LOOKING AHEAD
The BDO Global Heat Chart for regions and sectors is virtually unchanged in comparison
to Q2 2018, with 8,287 companies officially, or rumoured to be, up for sale. On a regional
basis, we can predict more transactions taking place in Africa (+26%), followed by Middle
East (+20%) and Israel (+19%), as we have seen the biggest moves in these regions in
comparison to the previous quarter. On the other hand, it is expected that CEE (-11%),
India (-8%) and Japan (-6%) will be the underperforming regions.
In terms of sectors, the strongest increases were seen in Leisure (+11%) and Pharma,
Medical & Biotech (+9%) while Industrials & Chemicals (-9%) and Energy, Mining &
Utilities (-3%) are expected to be less attractive sectors.
It remains to be seen to what extent

an impending trade war between the
US and China, and therefore associated
uncertainties, will affect global M&A
activity in the second half of 2018.
However, taking everything into MAREK FRANKE
consideration, we have to assume that HEAD OF GLOBAL M&A
2018 will not match the numbers we have
seen in the previous three years. marek.franke@bdo.ch
03 HORIZONS || BDO'S
BDO'SGLOBAL
GLOBALVIEW
VIEWOF
OFMID-MARKET
MID-MARKETDEAL
DEALACTIVITY
ACTIVITY
The date of 9 May 2018 Pakatan Harapan (PH), or the ‘Alliance of

Hope’, managed to secure a majority of
marked a historic day for 113, or 51%, of the 222 parliament seats
Malaysia. For the first in the 14th General Elections, ending
the previously unbroken rule of Barisan
time in 61 years since Nasional (BN), which had governed
independence, Malaysia Malaysia since 1957. The Rt. Hon Prime
had a new government, Minister Tun Dr Mahathir Mohamad, who
previously served as the fourth Prime
voted by Malaysians who Minister of Malaysia for 22 years, returned
wanted a change. this year as the country’s seventh Prime
Minister as well as the world’s oldest
current Prime Minister, at the age of 93.
The handover of the seat of power from
the old to the new has been smooth,
demonstrating Malaysia’s maturity
in dealing with changes. There were
concerns initially that the transition
of power might be bumpy after the
DATO’ FEIZAL
ousting of the coalition that had ruled
MUSTAPHA
CHAIRMAN Malaysia for over six decades, coupled
with the biggest challenge facing the new
feizal@bdo.my
ISSUE 3 || 2018
2018 04
MALAYSIA
CHANGE OF GOVERNMENT SIGNALS NEW HORIZONS
government, namely that it is a coalition Data from the country’s central bank, As part of the collective efforts of
of political parties that have never been Bank Negara, showed that the gross Malaysians to assist the new government
part of the federal government before, domestic product (GDP) growth of in reducing the nation’s national debts,
although some of the personalities behind Malaysia in the first quarter of 2018 the Tabung Harapan (also known as the
the coalition have had government had slowed to 5.4% from 5.9% in the Malaysia Hope Fund) was launched by
experience. To some extent, this led preceding quarter. However, the central the government on 30 May 2018. Riding
to knee-jerk sell-offs in the Malaysian bank is maintaining its GDP growth target on the wave of patriotism, the amount of
equities market immediately after for the full year at 5.5%-6%, supported by donations received passed the RM 150m
the elections as investors reacted to healthy domestic demand and improving (USD 37m) mark one and a half months
the change of government. A broad global growth and trade activities. after it was launched and the figure is
range of stocks on the Malaysian stock still rising.
The new Pakatan Harapan coalition
exchange, Bursa Malaysia, were hit post-
government has pledged to introduce The change in government for the first
election, particularly infrastructure and
a series of initiatives within its first 100 time in Malaysian history represents
construction stocks as well as politically-
days in government, including abolishing a truly remarkable milestone. The
linked counters. Despite the short-term
the Goods and Services Tax (GST) to unprecedented results from the 14th
market volatility, analysts’ and market
reduce the cost of living, standardising General Election have shown democracy
observers’ mid- to long-term outlook for
and increasing the minimum wage, at work in Malaysia. Pakatan Harapan’s
Malaysia remains positive as Malaysian
eliminating unnecessary debts, instituting stunning victory at the General Election
stocks are fundamentally strong and the
institutional reforms, reviewing the award marks the beginning of a journey towards
market needs time to assess the impact of
of mega projects, increasing transparency a new Malaysia that will take the nation
the unprecedented election results.
and freedom of speech, and undertaking to greater heights. Watch this space as
responsible and progressive fiscal Malaysia starts to shine and forges ahead.
reforms. After the abolishment of GST,
the Sales and Services Tax (SST) is set to
be reintroduced and is expected to be
implemented from 1 September this year,
after the necessary laws have been passed
in the parliament.
GLOBAL
8,287 RUMOURED TRANSACTIONS
P07 | NORTH AMERICA

MID-MARKET M&A ACTIVITY CONTINUES TO LAG
IN Q2 DESPITE POSITIVE ECONOMIC SIGNS
P09 | LATIN AMERICA

M&A ACTIVITY SLOWS DOWN IN Q2 AS
POLITICAL UNCERTAINTY STALLS INVESTMENT
SECTOR VIEW
RENEWABLES P37 REAL ESTATE P39 RETAIL P41

ISSUE 3 | 2018 06
P11 | UNITED KINGDOM & IRELAND

STRONG DEAL ACTIVITY RECORDED IN A BUOYANT M&A MARKET
P15 | BENELUX P17 | DACH

TOUGH START FOR 2018 M&A MID-MARKET DEAL ACTIVITY
ACTIVITY CONTINUES INTO Q2 STAGNATES IN Q2
P21 | CEE & CIS

P19 | NORDICS WEAK START TO 2018 M&A ACTIVITY
NORDIC M&A MARKET LOOKS TO BE CONTINUES IN LINE WITH GLOBAL TREND
SOLID FOR THE REMAINDER OF THE YEAR
P29 | JAPAN
SMALL, KNOWLEDGE-
INTENSIVE INDUSTRIES
SET TO DRIVE FUTURE
MID-MARKET ACTIVITY
P27 | CHINA
DEAL VALUE AND VOLUME SOARS
AS BUSINESS CONFIDENCE REMAINS
HIGH AND THE CHINESE ECONOMY
CONTINUES TO GROW
P23 | ISRAEL
M&A ACTIVITY RECOVERS IN Q2
WITH A BIG RISE IN VALUE AND
FUTURE DEAL PIPELINE LOOKS HEALTHY
P31 | SOUTH EAST ASIA

M&A ACTIVITY STALLS IN Q2
P25 | AFRICA
DEAL ACTIVITY HITS A 10-YEAR LOW
BUT PROSPECTS ARE POSITIVE
P33 | AUSTRALASIA
WEAK M&A ACTIVITY IN Q2 2018 BUT
P13 | SOUTHERN EUROPE STRONG PIPELINE INDICATES A HEALTHY
DEAL VOLUMES FALL BACK IN Q2 SECOND HALF OF THE YEAR
BUT PE DEAL SIZE RISES
Key % movement
-30% to -21% -20% to -11% -10% to -1% 0%
1% to 10% 11% to 20% 21% to 30%
Key % movement
-30% to -21% -20% to -11% -10% to -1% 0%
1% to 10% 11% to 20% 21% to 30%
Note: The colouring illustrates the movement of expected transactions

compared to the expected transactions in the previous quarter.
NORTH AMERICA
MID-MARKET M&A ACTIVITY CONTINUES TO LAG IN Q2 DESPITE POSITIVE ECONOMIC SIGNS
Overall, the North American market This strong economic picture drove the US
experienced a downward trend in central bank to raise its base rate by 25
the volume of mid-market M&A basis points in June, citing optimistic views
deals during Q2 2018. on economic growth. Similarly, the Bank of
Canada is expected to raise its benchmark
Deal volume decreased to the lowest level rate by 25 basis points in July 2018.
since Q2 2013 with 432 deals reported,
generating an aggregate value of USD INCREASED PROTECTIONISM
BIG PICTURE 45.8bn. Despite the positive market Despite the economic landscape’s positive
conditions including abundant cash levels, trends, including US tax reductions and
• Deal volume down 23% in Q2 2018 low interest rates and strong equity high levels of cash on hand for potential
against previous quarter and 30% markets, both strategic and PE investment investors, deal-makers have continued
compared to Q2 2017 weakened in the quarter. to employ a wait and see approach with
• Deal value down 22% in Q2 2018 The overall economic landscape for both regards to M&A in North America. The
against Q2 2017 and down 23% from Canada and the US showed positive signs stagnant approach is a result of political
previous quarter throughout the second quarter. The S&P and regulatory uncertainty, particularly
• Concerns over the global economy, 500 and NASDAQ grew by 2.9% and 6.3% surrounding increasing protectionist
regulatory uncertainty, and positive respectively over the quarter. US gross sentiment, aggressive valuations and a
American tax reforms diverting investors domestic product is anticipated to grow to diverted focus from strategic buyers.
focus have negatively impacted activity 3.8%, higher than the Q1 growth of 2.2%, The second quarter of 2018 saw President
which would be the best growth rate since Trump introduce tariffs on a wide range
• Q2 2018 activity fell in all sectors
Q3 2014. The Canadian economy also saw of goods with some of its largest trading
compared to previous quarter with the
a positive macro environment with the partners including Canada, China, the
exception of Financial Services and
S&P/TSX Composite Index rising by 5.9% European Union and Mexico. Trump
Leisure industries. The biggest decreases
since the close of Q4 2017. In June, the also continually indicated a desire to
were in Technology & Media and
Canadian economy saw strong job creation end the North American Free Trade
Industrials & Chemicals.
through the addition of 32,300 net jobs.
800 PE/TRADE VOLUME & VALUE 80,000
700 70,000
600 60,000
VALUE (USD M)
500 50,000
VOLUME
400 40,000
300 30,000
200 20,000
100 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Trade Volume PE Volume Total Value (USD M) PE Value (USD M)
ISSUE 3 | 2018 08
NORTH AMERICA
HEAT CHART BY SECTOR
Technology & Media 562 23%

Pharma, Medical & Biotech 452 18%
Industrials & Chemicals 432 18%
Consumer 362 15%
Agreement (NAFTA). A further example LOOKING AHEAD Business Services 242 10%
of protectionist legislation includes the Energy, Mining & Utilities 198 8%
recent proposed bill in the US allowing Moving into the second half of 2018, we
Financial Services 125 5%
the ability to review and reject pending expect mid-market M&A activity to trend
transactions between foreign and positively in Canada. Tariffs on steel and Leisure 61 2%
domestic entities. The future effects aluminium may hinder the oil and gas Real Estate 28 1%
of protectionism and potential trade industries as well as other sectors where
TOTAL 2,462 100%
wars on M&A may not be viewed as significant increases in input costs could
a significant deterrent or top-of-mind deter M&A activity. Fortunately for the
factor in domestic markets. However, Canadian economy, activities in other
their influence on cross-border markets may counteract the tariffs on NORTH AMERICA
transactions and investments is likely to steel, aluminium and other products. For MID-MARKET VOLUMES BY SECTOR
be notable, whether that be positively example, the rapidly expanding cannabis
or negatively. As investors hold record industry poses the unique opportunity to 2017 2018
amounts of capital, they are expected introduce a brand new market overnight
to continue to feel out the market as after the federal legalisation comes into
the political landscape and its effect effect. It is reasonable to assume that
on international relations and M&A the introduction of a new market has the
520 236
continues to shift quickly. potential to spark an identifiable boom
In addition, as a result of aggressive in capital markets and the M&A space
seller expectations, both private and in Canada. Moreover, on the back of a
public valuations have soared, which strong US dollar and a wide gap between
16
Canadian and US valuations, US-based 7
has contributed to the lull in transaction
volume. With billions of additional buyers have the incentive to further fuel 228
100
dollars coming into the US market M&A activity in Canada. In the US, both
through tax breaks and repatriation strategic and private equity buyers should 75
programmes, investors may have also drive increased M&A activity as 36
temporarily diverted their focus away they look to deploy increasing amounts
from inorganic growth initiatives with of cash on the back of pro-business
the large, additional influx of cash flow. regulatory reform. 422
176
252
104
RYAN FARKAS
MANAGING DIRECTOR
362
141
rfarkas@bdo.ca
18 64
269 129
Technology & Media Financial Services

Real Estate Energy, Mining & Utilities
Pharma, Medical & Biotech Consumer
Leisure Business Services
Industrials & Chemicals
LATIN AMERICA
M&A ACTIVITY SLOWS DOWN IN Q2 AS POLITICAL UNCERTAINTY STALLS INVESTMENT
Latin America’s mid-market KEY DEALS AND SECTORS

completed 71 deals worth USD Just as reported in previous periods, the
6,800m in Q2 2018. Both volume appetite of investors for infrastructure
and value fell compared to the and energy projects remained high in
previous quarter, with total volume Q2 2018. The Energy, Mining & Utilities
decreasing by 5.3% and total value sector led the quarter with 16 deals and is
by 14.3%. expected to attract more investment in the
BIG PICTURE future quarters. Industrials & Chemicals is
However, the number of PE deals increased another key sector in the region and has
• The volume and value of M&A activity compared to Q1, from 63 to 70, although been responsible for the most deals so far
decreased compared to the previous their overall value was slightly smaller. in 2018.
quarter. Uncertainty caused by upcoming M&A activity in Q2 2018 was also down The top 10 deals had a significant stake
elections in Brazil and the election of a compared to the same period in 2017, in Q2 2018 as they were worth a total of
new leftist president in Mexico stalled when the Latin America mid-market USD 3,429m, and represented more than
investment completed a total of 78 deals worth USD half (50.4%) of the region’s deal activity.
• Investments and expansion strategies 8,355m, 18.6% more than last quarter. PE The target countries were very diversified,
delayed during the recession in the last dropped from 12 to 8 deals, resulting in a with Chile the only country with more than
two years in Brazil should regain speed 60.2% loss of value. one deal. The region’s biggest economies
after the October election, led by the had low representation in the top 10,
Looking at the 12-month picture, 308
Energy, Mining & Utilities sector with a single deal from Mexico and none
deals were closed, exactly the same
• Consumer was present in five of the top amount as the previous year. However, the from Brazil, while smaller economies such
10 deals and Energy, Mining & Utilities total value of the deals was 15.6% less. The as Paraguay, Panama, Bolivia and British
sector had the most deals in Q2 2018. value per deal was USD 87,2m, while last Virgin Islands all saw deals.
year’s average deal value was USD 103,3m. In Q2 2018’s top 10 deals, Consumer was
Another highlight of Q2 2018 was the responsible for five deals, with a value of
increased number of PE buy-outs in Latin USD 1,483m and Energy, Mining & Utilities
America. PE represented 11.3% of all deals had a total value of USD 1,209,
deals in the quarter, its biggest share since including the biggest deal of the quarter
Q2 2017. In terms of total deal value, PE between Mitsubishi and Anglo American
accounted for 10%. in Peru, which had a value of around
USD 500m. The two sectors combined
represented 79% of the top 10 deal value
in Latin America.
120 12,000
100 10,000
VALUE (USD M)
80 8,000
VOLUME
60 6,000
40 4,000
20 2,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 10
POLITICAL AND retaining the resources in the US. This

ECONOMIC CONTEXT has made it more difficult for other
While some countries such as Chile, countries with higher tax rates, like Brazil LATIN AMERICA
with 34%, to obtain capital inflows. HEAT CHART BY SECTOR
Colombia and Peru are enjoying
favourable political and economic Industrials & Chemicals 76 20%
conditions, which are boosting their LOOKING AHEAD
growth, Brazil and Mexico, Latin
America’s biggest economies, are facing Latin America represents 5% of the Energy, Mining & Utilities 63 17%
economic pressures combined with global market, with 378 deals announced Business Services 53 14%
political turmoil and uncertainty. or under way, as shown in the BDO Heat
Consumer 50 13%
Chart. Industrial & Chemicals is the most
Brazil was hit by a general truck strike represented sector in the Heat Chart, Financial Services 32 8%
in May and early June, when truckers with 76 deals, followed by Technology, Pharma, Medical & Biotech 18 5%
blocked highways and interrupted Media and Telecom (65), Energy, Mining
the supply of basic materials until the & Utilities (63), Business Services (53) Leisure 17 4%
government cut fuel prices, paralysing and Consumer (50). Real Estate 4 1%
most of the Brazilian economy’s key
Although the Brazilian economy has TOTAL 378 100%
sectors and significantly holding back
growth in Q2. This was a one-time event been erratic of late, with the country’s
but it has had collateral effects such as GDP downgraded and the IBOVESPA
slowing down the country’s economic (Brazilian exchange index) wavering,
LATIN AMERICA
recovery and forcing the government mostly related to the uncertainty caused MID-MARKET VOLUMES BY SECTOR
to pull back on the austerity reforms by the upcoming elections and potential
to contain the protests, worsening the interest rate hikes in US, the country 2017 2018
challenging situation it faces to pass is still on the radar of M&A investors
the much needed reforms to balance seeking returns in the medium and long 27 10
government accounts and reduce debt. term. The environment of controlled
4
inflation and a slow but recovering 5
The presidential election is another economy is interesting for investors. 21 10
major event that will affect the local Brazilian assets are affordable and
economy and markets. Investors have although risky, can offer higher returns.
16 6
pessimistic attitudes about the polls’ Investments and expansion strategies
indicators, resulting in the decline of the delayed during the recession in the last
local stock market. However, the most two years should regain speed from now
feared scenario by investors, the return on. This recovery will probably be led by
of Luiz Inacio Lula da Silva, is unlikely to 57 33
Energy, Mining & Utilities but it may also
happen, as the former Brazilian president stimulate activity in other sectors like
was sentenced to at least 12 years in Consumer and Retail.
prison and could now be ineligible
to run for the presidency. This wave China leads the way in investments in 25
of pessimism, however, is devaluing Brazil and Latin America and this should
13
Brazil’s currency and, consequently, local continue, especially in Energy, Mining
business are becoming more appealing & Utilities projects, both to enter or
for foreign investors looking for buy expand its businesses through mergers
undervalued enterprises and believe the and acquisitions. Despite the trade war
78
country’s economy will rebound in 2019. announced between China and the US, 26
planned investments from China in Latin
Strong political uncertainty is also America should not be affected. China
surrounding Mexico and their new sees Brazil as a strategic partner, with
president with a leftist agenda. The idle capacity in the Energy, Mining &
direction that the new government will Utilities sector and views the country as
follow is not yet clear, but there are some 20
having good investment opportunities.
concerns about a possible retreat on 40
structural reforms and increased public
spending on social policies. There are
other major events that can affect the
Mexican market and possibly the whole 48 24
of Latin America, such as the NAFTA
negotiations, which are proceeding ROMINA LIMA
slowly and there is still a threat that the DIRECTOR, ADVISORY
US could decide not to continue with the Technology & Media Financial Services
agreement, which would significantly romina.lima@bdobrazil.com.br Real Estate Energy, Mining & Utilities
change the region’s economic outlook. Pharma, Medical & Biotech Consumer
The tax reforms implemented by the US Industrials & Chemicals
government have already had effects
on emerging markets economies. The ADRIANO
income tax rate was cut from 35% CORREA
to 21% for companies operating in CORPORATE FINANCE AND
ADVISORY PARTNER
American territories, attracting and
adriano.correa@bdobrazil.com.br
UNITED KINGDOM & IRELAND

STRONG DEAL ACTIVITY RECORDED IN A BUOYANT M&A MARKET
After a dip in activity in Q1 2018, it KEY DEALS AND SECTORS

was pleasing to see that volumes Cross-border interest from acquirers
recovered in Q2 with 134 completed remains high despite ongoing uncertainty
transactions, representing an as to what a Brexit deal will look like for the
up-tick of over 15%. UK. This is borne out by 70% of the largest
deals in the period being led by overseas
This was very much in line with what we acquirers. North America was again the
BIG PICTURE are experiencing in the market with high main region, with deals including the USD
volumes of deals and enquiries. We believe 479m acquisition of a controlling interest
• TMT was the busiest sector and was that the biggest issue for buyers remains in Cabot Capital Management Group by
responsible for nearly 25% of all Q2 deals finding the right business to buy in the face Encore Capital Group and the USD 351m
of strong competition and pricing from both acquisition of a controlling interest in
• Capital markets remained strong
trade and private equity buyers. Hermes Fund Managers by Federated
• UK & Ireland continued to offer good
The mix of buyers remained at a similar Investors. Both of these were Financial
value and remains attractive for
proportion over the period with trade Services sector deals.
overseas buyers.
accounting for around 80% of all In terms of overall sectors, TMT saw the
acquisitions. We do not believe that this was highest level of activity, representing
a reflection of any lack of funding or interest nearly one in four of all deals in the
from private equity and indeed we continue period. Business Services and Industrials
to see them actively participating in many & Chemicals were the next two busiest
processes alongside trade. In value terms sectors. There was an uptick in Leisure
at USD 9.5bn, the mid-market remained deals but Real Estate lagged with one two
healthy with ample cash and available debt transactions in the period.
to fuel it.

18,000
250
16,000
14,000
200
VALUE (USD M)
12,000
VOLUME
150 10,000
8,000
100
6,000
4,000
50
2,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 12
UNITED KINGDOM & IRELAND


Business Services 56 13%
Consumer 54 13%
The capital markets continued to perform LOOKING AHEAD Industrials & Chemicals 42 10%
well with the FTSE All Share closing the Energy, Mining & Utilities 35 8%
quarter strongly at 4,202. New issues Looking ahead, the market intelligence in Pharma, Medical & Biotech 26 6%
remained strong with over 40 new issues the BDO Heat Chart shows a continued
in the period of which the majority were strong level of rumoured deals at 423. Leisure 16 4%
on AIM. These included CIP Merchant This is in keeping with our own experience Real Estate 11 3%
Capital, which raised around USD 65m of and the amount of funds that are TOTAL 423 100%
new money and City Pub Group, which available for M&A transactions, both on
raised around USD 45m of new money. corporate balance sheets and in private
We believe that the stock market remains equity funds, and the cost of debt despite
a leading indicator of the strength and an interest rate rise is still relatively low. UNITED KINGDOM & IRELAND
resilience of the economy in the region. The TMT sector leads the way with a MID-MARKET VOLUMES BY SECTOR
massive 120 deals of all rumoured deals.
M&A valuations increased for trade buyers
TMT is followed by the Financial Services 2017 2018
with BDO’s private company price index
and Business Services sectors, with half
(PCPI) to an EV/EBITDA ratio of 11.6x,
that number of rumoured deals each. We
the highest since Q4 2014. We believe
remain optimistic for the M&A prospects
the multiple continues to reflect cash
of the region as whole. 141
resources available and the preparedness 65
to pay premium prices for a good strategic
fit. BDO’s private equity price index (PEPI)
increased to an EV/EBITDA ratio of 13.5x,
the highest in 7 years. We continue to see 16
large amounts of cash to invest which in 40 4
our opinion should keep overall multiples JOHN
up aided by the theme of continued STEPHAN 16
digitalisation within businesses. M&A PARTNER 61
john.stephan@bdo.co.uk 21
97
39
52
18
66
20
64 20
120
47

SOUTHERN EUROPE
DEAL VOLUMES FALL BACK IN Q2 BUT PE DEAL SIZE RISES
The number of PE deals declined KEY SECTORS

significantly compared with Q1 2018, The most active and dominant sector in
dropping from 40 transactions to 23. Q2 2018 was Industrials & Chemicals, with
Looking at PE as a proportion of the total 35 transactions, following the consistent
number of transactions, PE represented trend from both 2016 and 2017. This sector
18.9% of the overall deals in Q2 2018, represented 28.7% of Southern Europe’s
whereas in Q1 2018 this figure was 28.2%. mid-market deals, followed by TMT and
BIG PICTURE A similar fall in the overall number of deals Pharma, Medical & Biotech, with both
can be seen when comparing Q2 2018 to sectors accounting for 12.3%. The Leisure,
• Deal volumes fell back in Q2 2018 but Q2 2017, when there were 47 PE buy-outs, Financial Services and Consumer sectors
deal values showed slight increase representing 26.3% of the overall deals. represented 11.5%, 10.7% and 9.8% of
• Average PE deal size grew, reaching a peak However, in terms of value, Southern overall volume respectively. The sector
of USD 156m Europe mid-market PE activity shows a with the least number of deals remains
different picture. PE deals in Q2 2018 Real Estate, with only one deal completed
• Industrials & Chemicals continued to lead in Q2 2018.
recorded a total value of USD 3.59bn.
the way as the most active sector
Although the value of PE deals in Q2 2017 The Business Services sector saw a
• BDO Heat Chart predicts that Consumer was substantially higher at USD 4.27bn, decrease, with only nine transactions in Q2
is set to become the leading sector. comparing the values as a proportion of 2018, its lowest number of transactions
the overall deals, PE deals in Q2 2018 were in recent years. Likewise, TMT has seen
Q2 2018 in the Southern Europe responsible for 31.2% of overall deal value, a reduced number of transactions, from
compared to 27.4% in Q2 2017. 27 in Q1 2018 to 15 in Q2 2018, and this
mid-market saw a total of 122
transactions, with an overall value Average PE deal size has increased and represents its lowest volume since the
of USD 11.51bn. This represented reached a high in Q2 2018 based on 2017 beginning of 2017. Although Leisure saw a
a decrease of 14.1% in transaction and 2018 deal activity to date, which sharp decline in Q1 2018, it showed strong
confirms the interesting aspect of PE growth in Q2, reaching 14 transactions.
volume compared to the previous
activity in the quarter. Activity declined Deal activity in Financial Services remained
quarter and a slight increase of constant, whereas the number of PE
from USD 103m in Q4 2017 to USD 88m
4.5% in terms of transaction buy-outs in the Energy, Mining & Utilities
in Q1 2018 and reached its current peak
value. However, when compared in Q2 2018 by growing to USD 156m. and Consumer sectors dropped by 38.5%
to the corresponding quarter in Looking at these results, Q2 2018 was and 29.4% respectively, compared to
the previous year, the results were characterized by fewer PE deals in terms of Q1 2018.
disappointing as there has been a volumes but with bigger values.
decrease of 31.8% in volume and
26.2% in value.

18,000
200 16,000
14,000
VALUE (USD M)
150 12,000
VOLUME
10,000
100 8,000
6,000
50 4,000
2,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 14
KEY DEALS FOCUS ON ITALY: SOUTHERN EUROPE

KEY DEALS AND SECTORS HEAT CHART BY SECTOR
The value of the quarter’s top 10 deals
was USD 3.75bn, accounting for 32.6% Now that the economic crisis in Italy Consumer 124 21%
of the overall transactions in the region. seems to have been overcome, Italian
corporates are finally increasingly
The quarter’s major deal was in the TMT confident in investing and completing Industrials & Chemicals 111 19%
sector and saw the acquisition of all the acquisitions abroad to give their Business Services 80 14%
shares in Italian company Facile.it S.p.A. companies the scope for international
by EQT Partners AB for USD 469m. The Financial Services 47 8%
growth. Although Italy is facing a period
second biggest deal was in Financial of geopolitical instability, it is predicted Energy, Mining & Utilities 40 7%
Services and saw the acquisition of that the positive trend seen in Q1 will be Leisure 35 6%
40.8% of Italian company Vittoria maintained throughout the rest of 2018.
Assicurazioni S.p.A. for USD 454m. Pharma, Medical & Biotech 29 5%
Further transactions worth mentioning As far as big transactions by Italian Real Estate 7 1%
were SIA S.p.A.’s acquisition of First companies in Q2 are concerned, the major
TOTAL 590 100%
Data Corporation (a card processing deals worth mentioning included the
businesses in Central and South eastern two Italian companies Ferrero S.p.A. and
Europe) in the TMT sector for a value of Prysmian Group S.r.l.’s recent acquisition
USD 440m, and the acquisition of the of the US confectionery business unit SOUTHERN EUROPE
Portuguese company Lagoas Park, S.A. by of Nestlè and General Cable. Moreover, MID-MARKET VOLUMES BY SECTOR
Kildare Partners for USD 438m. there are already several pending
transactions forecasted to be closed in 2017 2018
Among the other deals in Q2 2018, the next quarter: Atlantia, for example, is
Italian-based companies were the most still waiting to buy the Spanish motorway
targeted, recording six transactions concession holder Abertis, while the 111 42
out of the top 10 in Southern Europe, merger of eyewear giants Luxottica Group
with a total value of USD 2,237m. Each S.p.A. and Essilor S.p.A. represents a huge
of these deals took place in a different deal, with an overall value of nearly 3
sector, namely TMT, Financial Services, USD 29bn. 18
Business services, Consumer, Leisure,
45 26
and Industrials & Chemicals, a mix that Finally, there was the acquisition of 100%
proves Italian companies are recognized of Scrigno Holding (the parent company
as leading firms by international of counter frames for sliding and pocket 50 20
investors. As a matter of fact, four doors and windows manufacturer Scrigno
transactions out of the six (66.7%) Group) by Clessidra SGR, for a total value
involved cross-border transactions, of almost USD 123m.
meaning that Italian corporations still
retain their worldwide appeal. The LOOKING AHEAD 153
acquisition of Augustea Atlantica & York 73
capital management (16 vessels) by The BDO Heat Chart shows that by the
Star Bulk Carriers Corp for USD 433m, beginning of Q3 2018, the cumulative
together with Facile.it S.p.A. and Vittoria volume of PE in Southern Europe is
Assicurazioni S.p.A., make up the three predicted to reach 590 deals, which is 43
major Italian company acquisitions, forecast to represent 7.1% of the total
which were, in addition, also in the global transactions. The Consumer sector
region’s top five overall deals. is predicted to lead the way, accounting for 68 25
21.0% (124 deals) of the total number of
Finally, another point worth highlighting
deals in Southern Europe. It is followed by
is that TMT was the region’s most 21
TMT and Industrials & Chemicals, which
attractive sector in terms of the number
are estimated to reach 19.8% (117 deals) 84
of transactions in Q2 2018. In fact, TMT
and 18.8% (111 deals) respectively. Overall,
transactions, which included two of the
these three sectors collectively represent 29
top three acquisitions, accounted for a
59.7% of the total volume of expected
total of USD 1,269m, representing 33.8%
transactions in Q3 2018. Even though it
of the total value of the top 10 deals. 102
is not in the top three, Business Services
25
is still considered an important sector in
the region as it is predicted to recover and
attract 13.6% of possible transactions. Technology & Media Financial Services
STEFANO
VARIANO
PARTNER
stefano.variano@bdo.it
BENELUX
TOUGH START FOR 2018 M&A ACTIVITY CONTINUES INTO Q2
Looking at M&A activity in the 2017 compared to 50 deals in the first half
Benelux in Q2 2018, there has been of 2018, deal volume decreased by 25%.
a significant decline in both deal The total deal value decreased from USD
volume and deal value. 5,637m in the first half of 2017 to USD
4,460 in the first half of 2018. However,
M&A activity in terms of number of the average deal value increased from USD
the completed deals in Q2 2018-22 84.1 million in the first half of 2017 to USD
BIG PICTURE – has not been this low since Q2 89.2m in the first half of 2018. PE closed
2013. And in terms of value, the seven deals in the first half of 2018 (first
• Q2 2018 saw big falls in deal volume performance in Q2 2018 nearly half of 2017: 18), with an average deal
and value equalled the all-time low of Q4 value of USD 81.7m.
• PE activity has been at a low level so far 2008, which was right at the start TOP DEALS
in 2018 of the recession. However, it is
The top 10 deals in Q2 2018 ranged
• Top 10 deals were split across interesting to note that this
from USD 398m to USD 21m. The top 10
different sectors. performance does not deviate deals took place in a variety of sectors
massively from the global M&A trend. which included Energy, Mining & Utilities,
The 22 deals that were closed in Q2 2018 Business Services, TMT, Industrials &
had a total deal value of USD 1,432m, with Chemicals, Financial Services and Pharma,
an average deal value of USD 65.1m (the Medical & Biotech sector.
average over the last three years has been The largest deal in Q2 2018 was the USD
USD 89.1). Private equity closed 23% of 398m sale of a majority stake of 80% in
these deals and its average deal value was Belgian independent power production
below Q2’s average at USD 14 million. company T-Power N.V., which is active
The first half of 2018 also showed a decline in the Energy, Mining & Utilities sector.
in deal volume compared to the first half The power production company was sold
of 2017. With 67 deals in the first half of by Itochu Corporation, Siemens Project
Ventures GmbH and Tokyo Gas Co. Ltd to
Belgian-based Tessenderlo Chemie N.V.
50 5,000
40 4,000
VALUE (USD M)
VOLUME
30 3,000
20 2,000
10 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 16
BENELUX

Consumer 34 16%
The second biggest deal was in the LOOKING AHEAD Financial Services 18 9%
Business Services sector where Dutch IT Pharma, Medical & Biotech 13 6%
company EvoSwitch Netherlands B.V. The BDO Heat Chart shows 208 deals
currently planned or in progress within Energy, Mining & Utilities 8 4%
was acquired by the American company
Iron Mountain Incorporated for USD the Benelux, which represents 3% of the Leisure 8 4%
238m. EvoSwitch Netherlands B.V. offers global deal volume. During the coming
Real Estate 4 2%
infrastructure solutions. The vendor months, most of the M&A activity is
expected to take place in the TMT sector TOTAL 208 100%
involved in this sale was the Dutch
company Ocom B.V. (24% of all deals), followed by Industrials
& Chemicals (20%). The Consumer and
The third biggest deal in Q2 2018 was Business Services sectors are both expected
the acquisition of a majority stake BENELUX
to account for 16% of all deals. The region’s MID-MARKET VOLUMES BY SECTOR
in the Dutch company OEP 10 B.V., projected deal activity in these four sectors
which is active in the TMT sector. The is in line with the global trend. 2017 2018
Chinese company Invengo Information
Technology Co. Ltd acquired the stake This indication is based on ‘companies
in digital library management system for sale’ tracked by Mergermarket in the
provider OEP 10 B.V. for USD 203m. The respective region between 9 January
2018 and 9 July 2018. Opportunities 11
vendor involved was the Dutch holding 28
company OEP Holdco 10 B.V. are captured according to the dominant
geography and sector of the potential
Going outbound, the largest deal of target company. The predicted deal flow is
Q2 2018 was for USD 434m. The based on the intelligence collected in the 2
Belgian company Euronav N.V. sold the database relating to companies rumored
American company Gener8 Maritime 5
to be for sale or officially up for sale. It is 17
Subsidiairy VII Inc, which operates very therefore indicative of sectors that are
large crude carriers, to the American likely to be active in the months to come. 2
company International Seaways, Inc. The
Netherlands was involved in the sale of a Even though M&A activity in the 8
minority stake in oil producer Mukhaizna Benelux, as well as global M&A activity,
Oil Field, which is active in the Energy, is currently registering a dip in both
Mining & Utilities sector. Royal Dutch volume and value, there is a good chance
Shell Plc sold Mukhaizna Oil Field for USD that this is a temporary state of affairs. 16
329m to the Indian Oil Corporation (IOC). The BDO Heat Chart shows that many 34
potential deals lie ahead.
8 2
5 3
GEERT
LUC AUGUSTIJN COSTERS 8
PARTNER M&A PARTNER 3
luc.augustijn@bdo.nl geert.costers@bdo.be
23 8

DACH
MID-MARKET DEAL ACTIVITY STAGNATES IN Q2
DACH M&A activity continued its second largest deal. The Australian acquirer
weak performance from the previous was Computershare Limited and the deal
quarter. However, total deal value value was USD 419m.
increased slightly but there was a The largest transaction with an Austrian
decrease in PE deal value. target in Q2 was in the real estate sector.
The Austrian RPR Privatstiftung sold a
Both deal volume and deal value remained
21.82 % stake in S IMMO AG to fellow
BIG PICTURE at a low level in Q2 2018. While deal
Austrian company Immofinanz AG.
value recorded a minor increase from USD
The takeover had a total deal value of
• Q2 deal volume stagnated to a five-year 3.8bn in Q1 2018 to USD 4.3bn in Q2
USD 361m.
low with a slight increase in deal value 2018, deal volume stagnated at the same
compared to the previous quarter level (42 deals). Looking at private equity In Q2 2018, six of the top 10 transactions
transactions, both PE deal volume and involved target companies based in
• Industrials & Chemicals the most active deal value dropped compared to the Germany. Three target companies are
sector in Q2, followed by TMT previous quarter. based in Switzerland and one in Austria.
• PE activity recorded a two-year low in Looking at the make-up of the bidder
deal value KEY DEALS companies, it was mainly international
• Germany was the region’s most attractive The largest deal in Q2 2018 was in the clientele with three companies from the
target country by deal value. Industrials & Chemicals sector. Interface US, one from China and Australia and five
Inc, the US-based leading and globally originating from Europe. Seven of the top
active manufacturer of floor coverings, 10 deals in the DACH region were cross-
acquired Nora systems GmbH, a German border deals.
based world leading supplier of high In general terms, the DACH M&A
quality rubber floors and system solutions, mid-market has been quite sluggish in
for USD 451m. With this acquisition, the first six months of the year. Total deal
Interface plans to expand its portfolio in volume (42 deals in Q1 and Q2) showed a
the field of elastic floors and to accelerate significant decline, constituting a five-year
sales growth. low. Total deal value in Q2 (USD 4.3bn)
The sale of Equatex AG, a Swiss-based showed a slight increase compared to the
leading European share plan management first quarter, but was still is at its lowest
services provider, represented the region’s point for the last seven years.
PE/TRADE VOLUME & VALUE

90 9,000
80 8,000
70 7,000
60 6,000
VALUE (USD M)
VOLUME
50 5,000
40 4,000
30 3,000
20 2,000
10 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 18
DACH

Consumer 41 12%
KEY SECTORS LOOKING AHEAD Financial Services 25 8%
Focusing on deal activity across most Pharma, Medical & Biotech 23 7%

sectors, the overall picture was stable. 2018 has started with a weak
Energy, Mining & Utilities 18 5%
The main exceptions were the Leisure and performance in DACH M&A mid-market
Pharma, Medical & Biotech sectors, which deals, as deal volume and value were both Leisure 8 2%
both saw decreases in total deal activity rather low. However, we maintain the Real Estate 3 1%
compared to the previous quarter. These belief that the M&A market will recover
TOTAL 331 100%
two sectors showed a decline of 75%- and increase performance to previous
100% in total deal volume. By contrast, the levels. Interest rates are likely to stay low
Real Estate sector increased its deal activity in the near future, providing good financial
from no deals in Q1 to five in Q2. conditions for transactions. DACH
MID-MARKET VOLUMES BY SECTOR
In the second quarter of 2018, the At present, there are 331 companies up
majority of M&A deals in the DACH region for sale in DACH’s mid-market, which is 2017 2018
involved companies from the Industrials in line with the 330 deals predicted in Q1
& Chemicals (31%) and the TMT (19%) 2018. We expect all sectors to keep up
sectors, which recorded the same number their momentum. Industrials & Chemicals
of deals completed compared to Q1 2018. and TMT are projected to remain the
Business Services, Consumer, Financial 16
most active sectors and Industrials &
Services and Energy, Mining & Utilities Chemicals sector is forecast to record a 58
all kept deal volumes at a stable level significant rise in deal volume (37 % of all
compared to the previous quarter.
deals forecasted). Finally, in general terms,
5
cross-border transactions – supported by
plentiful financial resources – are expected 5 5
to be a significant source of DACH’s M&A
activity in the quarters that lie ahead. 3
26
CHRISTOPH
ERNST
M&A MANAGER 8
christoph.ernst@bdo.at
26
58
5
12 0
12 10
14
14
30

NORDICS
PRIVATE EQUITY M&A ACTIVITY
The number of total Nordic M&A CROSS-BORDER IN FOCUS OF

transactions in Q2 2018 decreased TOP TEN DEALS BY VALUE
compared to same quarter last year, Top 10 deals in the Nordics in Q2 2018
with total deal value that declined accounted for over 60% of the total
by 21% (USD 5.4bn in Q2 2018). transaction value.
Overall, Q2 2018 performed less in both The top deals showed a great mixture
BIG PICTURE number of deals and total transaction of cross-border and national deals by
value in comparison to Q2 2017. However, which six out 10 deals were cross-border.
• Overall M&A performance in Q2 2018 the region experienced a positive boost Majority of the deals were made in Norway,
outperformed the previous quarter of 2018, in performance after a slow start in Q1 recording four out of ten deals, followed by
but failed to reach records levels of Q2 2017 2018, from which it rose by almost 50% in Sweden with three out of ten deals.
total transactions value and had increased The largest transaction was a cross-border
• Private equity continues to show high number of deals.
levels of dry-powder throughout Europe, deal in which the Norwegian company
however, Nordics experienced decreased The high activity among Nordic private Norske Skogindustrier ASA was sold
PE proportions in Q2 compared to same equity experienced in Q2 2017 did not to Oceanwood Capital Management
period last year repeat itself in 2018. Number of deals Ltd. in the UK for USD 488m. Norske
decreased by 60% while the total volume Skogindustrier ASA is operating within
• Industrials & Chemicals remains the the paper industry in Norway and was
incurring from PE firms decreased from
dominant sector in the region with TMT & founded in 1962, with headquarters in
c. USD 1,5bn to USD 660m.
Business services equally second Oslo, Norway.
• Largest deal of the quarter is a cross The proportion of total deal value from
private equity firms to total transactions The second largest deal was a close
border deal – Oceanwood Capital runner-up with a deal value of USD 449m.
Management in UK acquires Norwegian was far less than the historically well-done
Q1 of 2018. There were total nine PE The cross-border transaction took place
Norske Skogsindustrier ASA with a deal between the Norwegian company Songa
value of USD 488m. buyout transactions representing a 12,2%
Bulk AS and the bidder Star Bulk Carriers
of total transaction value and 15,3% of
Corp. from Greece in May this year.
total deal volume in the Nordics.
Songa Bulk AS is an investment vehicle
established to invest in dry bulk assets at
low levels.
8,000
100
7,000
80 6,000
VALUE (USD M)
VOLUME
5,000
60
4,000
40 3,000
2,000
20
1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 20
NORDICS

Consumer 28 15%
Third largest deal was Finish Asiakastieto LOOKING AHEAD Pharma, Medical & Biotech 15 8%
Group plc’s acquisition of UC AB in Energy, Mining & Utilities 14 8%
Sweden. UC AB is Sweden’s leading The Nordic M&A market looks to be Financial Services 12 6%
business and credit reference agency solid for the remainder of the year, with
with customers including companies, only minor areas of uncertainty in each Leisure 9 5%
private individuals and the public sector. country, such as the Danish public-sector Real Estate 3 2%
The deal was valued to USD 397m. labor dispute, the Swedish general TOTAL 185 100%
elections held in Q3 2018 or the high
INDUSTRIALS & CHEMICALS household debt in Sweden. However,
REMAINS MOST ACTIVE SECTOR
none are likely to influence the overall
The Industrials & Chemicals remained long-term M&A market in the Nordics. NORDICS
the most active sector accounting for M&A strategies will continuously be MID-MARKET VOLUMES BY SECTOR
14 of the 59 transactions in Q2 2018. employed as companies continue to
TMT had a strong second-place on the strive to adopt innovative technology 2017 2018
list with 11 deals out of 59 and thus
as quickly as possible to stay ahead of
remained one of the most active sectors
the curve.
in the region. Sharing the second place
with TMT is the Business Services sector Another notable trend is the overall
with equal number of deals, outrunning 61 23
private equity activity in the Europe with
the previously second runner-up increasing buyout proportions compared
consumer sector from Q1 2018. to previously dominant numbers for exit
volumes. Reasoning behind larger buyout 2
volumes is the fascinating fundraising 10
levels past years leading to higher dry- 12
20
powder levels to deploy. While similar
CLAES trends are expected to be seen during H2
NORDEBÄCK 8 5
2018, some uncertainties stemming from
PARTNER
CORPORATE FINANCE
Trump administration, such as employed
tariffs on European steel and aluminium,
claes.nordeback@bdo.se may result in the opposite.
86 29
5
17
8
25
12
26
21
38

CEE & CIS

WEAK START TO 2018 M&A ACTIVITY CONTINUES IN LINE WITH GLOBAL TREND
Looking at the M&A global market representing only three deals of the 57
so far in 2018, the CEE & CIS region mid-market deals. The average size of
followed the downward trend. After these deals was reasonably low at USD
a weak start in Q1, the region’s 80m with a total value of USD 241m,
representing only 5.7% of all the value
M&A market could not recover
of the region’s transactions. All in all, the
and continued to decline in Q2
low PE deal activity was consistent with
2018. Even though a slight up-tick the global trend, both in terms of reduced
BIG PICTURE
was projected after the fall in Q1, volume and value.
• Deal volume was down 3% in Q2 2018 the number of mid-market deals
against Q1 2018 and 7% down compared completed in Q2 was 57, the lowest KEY SECTORS AND DEALS
to Q2 2017 number of transactions since 2008. The region’s top ten 10 deals had a
• Mid-market deals were dominated The total value of deals was USD 4,230m, combined value of USD 2.3bn, which
by TMT, Consumer, Energy, Mining & down 6% from the previous quarter’s USD represented about 56% of Q2’s overall
Utilities and Financial Services, with two 4,521m. Although the total volume of value. The most active sectors were TMT
thirds of the total deals deals in Q2 2018 was the lowest recorded with 12 deals, representing 21% of total deal
since 2008, in terms of value, the quarter volume and Consumer with 10 deals (18%).
• Only three PE deals were completed, Energy, Mining & Utilities and Financial
was better than Q2 2017. Private equity
representing 5.7% of the total value. services were both responsible for 14% of
transactions were also slack in Q2 2018,
total deal volume with eight deals each.
160 14,000
140
12,000
120
VALUE (USD M)
10,000
VOLUME
100
8,000
80
6,000
60
4,000
40
20 2,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 22
CEE & CIS


Consumer 95 15%
Of the top ten 10 deals in Q2 2018, there LOOKING AHEAD Financial Services 53 9%
were three each in TMT and Industrials & Energy, Mining & Utilities 52 8%
Chemicals. Overall, the majority of the According to the BDO Heat Chart, which
sectors performed at similar levels to Q2 captures all sales that are either planned, Pharma, Medical & Biotech 36 6%
2017, apart from Industrials & Chemicals, rumoured or in progress, 613 deals are Leisure 28 5%
where saw a big drop from 16 to seven expected to be made in the region, which Real Estate 12 2%
transactions. represents a notable fall compared to Q2
TOTAL 613 100%
2017 (717).
However, Consumer recorded a
significant increase from six to 10 This drop in the number of expected
deals compared to Q2 2017. This sector transactions in CEE & CIS is not in line
also accounted for the two biggest with world economic trends. BDO’s CEE & CIS
Global Heat Chart forecasts 8,287 deals, MID-MARKET VOLUMES BY SECTOR
transactions, with each deal worth
USD 299m. which is slightly below Q2 2017 levels
2017 2018
(0.5%), whereas CEE & CIS’s fall is much
Even though the number of TMT deals
more significant (-14,5%). Despite the
remained the same as previous quarters,
reduced number of potential transactions,
it became the region’s most important 48
CEE & CIS still maintains its position of 25
sector in Q2 with 12 deals, representing
third place among the regions covered
21% of total deal volume.
in this report, as in the previous years,
2
sitting behind North America and China.
11
Even though there was a huge drop in the 1
19
number of Industrials & Chemicals deals, 5
the BDO Heat Chart indicates that there
will be an up-tick in M&A activity and 11
predicts that it will be the most active
ÁKOS BOROSS sector in the coming periods. Finally,
79
PARTNER
according to the chart, TMT is expected
to remain very prominent in the region
akos.boross@bdo.hu with 129 projected transactions. 19
27 12
36
15
45
18
35
10
2
ISRAEL
M&A ACTIVITY RECOVERS IN Q2 WITH A BIG RISE IN VALUE
AND FUTURE DEAL PIPELINE LOOKS HEALTHY
A total of 13 deals, with a combined In Q2 2018, PE was responsible for one

value of USD 1.29bn, were deal worth USD 11m, which represented
successfully completed in Q2 2018. 7.7% of the deal count and 0.9% of the
This represented an 82% increase in value for the quarter.
deal value, despite a 18.7% decrease
KEY DEALS AND SECTORS
in deal volume from 16 completed
Israel's top 10 Q2 2018 deals had
deals to 13 compared to Q1 2018.
BIG PICTURE an aggregated value of USD 1.26bn,
Deal value was strengthened by
representing 98% of total M&A
• Q2 2018 M&A value grew sharply a 124% increase in the average transactions. The largest transaction was
(82.4%) in comparison to the previous transaction value for the quarter of the USD 307m acquisition of Shikun
quarter while deal volume fell (18.7%) USD 99m, indicating an uptick in & Binui Group, one of Israel’s largest
from 16 to 13 deals the number of big-ticket deals. infrastructure companies. Shikun & Binui
• BDO Heat Chart shows 80 potential Total deal numbers recorded a slight drop Group was purchased by US-Israeli real
deals, suggesting a ramp-up in from 16 in Q1 2018 to 13 in Q2 2018, a fall estate investor Nati Saidoff from US-Israeli
activity ahead of 18.7%, but total deal value increased billionaire Shari Arisson, previously the
sharply during the same period. This led to controlling shareholder in Shikun & Binui
• PE activity declined further in Q2 2018 with an 84% holding.
after a slow Q1 2018. a significant rise in the average deal value
from USD 44m in Q1 2018 to USD 99m Other deals included the USD 300m
in Q2 2018, which is the highest second financing round in Landa Digital Printing,
quarter average transaction value for which has developed a unique digital
five years. technology called Nanography. The
Private equity activity fell heavily from current funding round was led by private
previous quarters. The Q2 2018 figures investment company Skion GmbH with the
were the lowest in the last 13 quarters, participation of previous investor German
which indicates a continuing weakness in chemicals group Altana.
both value and volume.
25
2,000
20
VALUE (USD M)
1,500
VOLUME
15
1,000
10
500
5
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 24
ISRAEL

Consumer 5 6%
Other transactions included the USD LOOKING AHEAD Business Services 4 5%
242m acquisition of Avgol Industries by Financial Services 4 5%
Indorama Ventures and the USD 90m Looking ahead, the picture improves
Leisure 4 5%
acquisition of BriefCam by Canon. significantly. At the end of Q1 2018,
the BDO Heat Chart showed 67 deals Energy, Mining & Utilities 2 3%
Technology & Media was the most
planned or in progress, compared to 80 Real Estate 1 1%
active sector, accounting for five deals
deals in Q2 2018, which indicates a 19%
(38% of total transactions) in Q2 2018. TOTAL 80 100%
jump in pipeline deals.
Industrials & Chemicals was in second
place, accounting for four deals (30%). The BDO Heat Chart for Israel shows
The remaining sectors with one deal there are 80 deals planned or in progress
each were Business Services, Consumer, for M&A with 40 (50%) related to ISRAEL
Energy, Mining & Utilities and Real Estate. TMT and 12 (15%) involving Industrials
& Chemicals. Other sectors include
Six of the top ten deals involved foreign 2017 2018
Pharma, Medical & Biotech with eight
bidders, supporting Israel's resilient
deals (10%), Consumer with five deals
economy and robust equity market.
(6%), and Business Services, Financial
Out of those six foreign investors, three
Services and Leisure with four deals each
involved US buyers, one Japanese and
(5%). Energy, Mining & Utilities recorded
one German. 7
two deals and Real Estate recorded one
26
Israel continues to attract foreign deal only.
investment due to its favourable
economic conditions, considerable
incentives and strong R&D sector, 1
coupled with a high-skilled and
multilingual workforce. 3
TAMAR 2
BEN-DOR 0
PRINCIPAL, M&A
11
tamarbe@bdo.co.il
9
7
17
2
2
1
4 1
7 4
2
AFRICA
DEAL ACTIVITY HITS 10-YEAR LOW BUT PROSPECTS ARE POSITIVE
Q2 2018 saw a total of 18 mid- The biggest deal of the quarter was the
market M&A transactions in exercise of Kellogg’s option to acquire
Africa, with only one PE buy-out a stake in packaged food manufacturer
completed. This represents Tolaram Africa Foods, a subsidiary of
the Tolaram Group operating in Nigeria,
decreases of 33.3% compared
for USD 420m. Kellogg’s joint venture
to the previous quarter and 18%
agreement with Singapore-based Tolaram
compared to the corresponding in 2015 to take a 50% stake each in
BIG PICTURE
quarter last year. The proportion of distributor Multipro stated that Kellogg
• Q2 2018 saw 18 mid-market M&A deals PE buy-outs dropped significantly had the option to acquire a stake in
recorded with an overall value of USD from 22.2% to 5.6%, with only one Tolaram Africa Foods in the future, which
1.03bn - the lowest volume and value in deal (USD 48m) in this quarter. The it has now exercised. This deal alone
the last 10 years total transaction value decreased amounted to 41% of Q2’s total deal value
by 48% to USD 1.03bn in Q2 2018, for the 50 countries making up the African
• Only one PE buy-out took place with a
representing the lowest mid-market mid-market M&A region.
value of USD 48m, representing 4.7% of
overall value M&A deal value and volume for the The second largest transaction was
last 10 years. in the Industrial & Chemicals sector,
• Industrials & Chemicals and Energy,
with German company ATON GmbH’s
Mining & Utilities were the joint top
KEY DEALS AND SECTORS acquisition of a 56.06% stake in South
sectors, accounting for a combined 55.6%
Industrials & Chemicals, together with African-based Murray & Roberts Holdings
of mid-market deals.
Energy, Mining & Utilities, were the two Limited. This transaction of USD 247m
most active sectors in Q2 2018, with accounted for 24% of African mid-market
five transactions each, amounting to deal value. Of Q2’s top 10 M&A deals
55.6% of the overall mid-market deals. in the Africa mid-market, five were in
The Consumer sector followed closely the Industrials & Chemicals sector for
behind with four transactions out of 18, an amount of USD 379m. Although the
accounting for 22.2% of the overall deals. Consumer sector only recorded two deals
in the top 10, it accounted for more than
50% of Africa mid-market deals value in
terms of volume.
60 5,000
50
4,000
VALUE (USD M)
40
VOLUME
3,000
30
2,000
20
10 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 26
The other deals in the Top 10 list ranged Nonetheless, the regional outlook AFRICA
between USD 17m to USD 62m. This year, remains subject to external and internal HEAT CHART BY SECTOR
two out of the 10 top deals took place risks. Unexpected capital outflows could
in Kenya. The first was the acquisition lead to large currency devaluations in
of Iberafrica Power (East Africa) Limited some countries. A harsh deterioration Energy, Mining & Utilities 33 23%
by South African company African in commodity prices would have Financial Services 22 15%
Energy Partners Limited for USD 62m. a substantial adverse effect on the Business Services 16 11%
This deal ranked third in the Top 10. The region, given the heavy reliance of
Consumer 11 8%
other Kenyan deal was the acquisition of many economies on commodity trades.
44.04% of Kenyan Cellulant Corporation Another possible risk to the region’s Technology & Media 10 7%
was acquired by US private investment economies could be a slowdown in Pharma, Medical & Biotech 5 3%
firm TPG for USD 48m. Chinese development given the threats Real Estate 4 3%
posed by interest rate rises or trade
South Africa accounted for four of the Leisure 2 1%
pressures with the United States.
top 10 transactions on both the target TOTAL 144 100%
and bidder sides. The political optimism
in South Africa, together with new LOOKING AHEAD
global M&A forces, are contributing to
The BDO Heat Chart for Africa mid-
a positive outlook and a rebuilding of
market M&A activity still suggests a AFRICA
investor confidence. MID-MARKET VOLUMES BY SECTOR
positive outlook, forecasting 144 deals in
2018, which is 12% less than in 2017. The
ECONOMIC OUTLOOK 2017 2018
most active sector this year is predicted
Sub-Saharan Africa (SSA) economic to be Industrials & Chemicals, with 41
growth’s is expected to hit 3.1% this deals, representing 28% of the total 13 4
year, according to the World Bank. This volume, with Energy, Mining & Utilities, 0 0
represents an increase compared to which has been the top performing 7 1
last year, thanks to rising commodity sector for several years, predicted to be
prices. While the crash in commodity 8
in second place this year with 33 deals 7
prices hit SSA economies hard, with expected. Financial Services is predicted
reduced government incomes and falls to be the third most active sector, with
in several of the continent’s currencies, 24
22 deals accounting for 15% of total
Nigeria, South Africa and Angola are deals for the region. Africa represents 2%
still expected to see a gradual pick-up in of the total global M&A deals expected 5
growth and economic development is in 2018.
still expected to continue at a pace in the
West African Economic and Monetary 26
Union and in most of East Africa.
In Angola, government measures
and reforms have contributed to a
more competent allocation of foreign
exchange, increasing natural gas 17
production, and the improved business
sentiment should help support economic AFSAR 44
growth. In South Africa, the pick-up in EBRAHIM
DEPUTY GROUP
business assurance is expected to help MANAGING PARTNER
withstand the continuing recovery in
business deals. afsar.ebrahim@bdo.mu
20
6
21 5

CHINA
DEAL VALUE AND VOLUME SOARS AS BUSINESS CONFIDENCE REMAINS
HIGH AND THE CHINESE ECONOMY CONTINUES TO GROW
Mid-market M&A levels in the • China’s Central bank has cut the banks’
Greater China region recorded 11% reserve ratio requirement by 1.25%
growth in deal volume from 743 over Q2 2018 to encourage business
deals in the first half of 2017 to lending and support economic growth.
826 deals in the first half of 2018. OUTBOUND INVESTMENT
A similar trend was noted for deal
China’s outbound investments continued
value, which grew 9% from USD to increase in Q2 2018 following the
BIG PICTURE
67.1bn in the first half of 2017 to introduction in 2017 of specific guidelines
• Deal volume and deal value increased by USD 73.0bn in the first half of 2018. and regulations for outbound investment.
10% and 26% respectively in Q2 2018 The Chinese government has been pushing Industries that benefitted in the first half
compared to Q1 2018 for economic structural reform, including of 2018 were mainly in the Industrials &
the following recent actions: Chemicals, TMT and Consumer sectors.
• Business confidence among Chinese
entrepreneurs continued to improve in • From May 2018, the Ministry of Due to the heightened tensions from the
Q2 2018. Chinese entrepreneurs are still Finance has reduced the value-added trade war with the US, Chinese entities
optimistic about the economic growth and tax rate from 17% to 16% have become more restricted in terms of
future market conditions as the country’s accessing the US market. While these are
economy continues to grow, supported by • The Ministry of Commerce has further still early days, more focus has been placed
strong economic fundamentals promoted and encouraged acquisitions on outbound investments in the Belt and
in the e-commerce and business Road regions. It is expected that outbound
• To mitigate the trade war with the US, services sectors along the Belt and
the Chinese government has reduced investments led by Chinese entities in this
Road countries region will continue to rise in the second
value-added tax rates and further eased
restrictions on foreign investment. It is • The National Development and half of 2018. However, this may limit the
expected that the Chinese government will Reform Commission announced overseas industries in which China can
introduce more reform policies in the next on 28 June 2018 that it would be invest. For example, there may be less
quarter and continue to promote the Belt further easing restrictions on foreign opportunities in the advanced technology
and Road initiative. investment in various sectors, space in the Belt and Road regions.
including agriculture, automotive
and banking
600 5,000
500
4,000
VALUE (USD M)
400
VOLUME
3,000
300
2,000
200
100 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 28
CHINA

Consumer 121 11%
INBOUND INVESTMENT TOP DEALS Financial Services 103 9%
China’s inbound investments were stable The largest mid-market deal in Q2 2018 Pharma, Medical & Biotech 95 8%
in Q2 2018 compared to the same period was in the Pharma, Medical & Biotech Energy, Mining & Utilities 60 5%
in 2017. The Ministry of Commerce sector. The top three major mid-market Real Estate 47 4%
indicated in June 2018 that foreign direct deals were:
investment into China only rose 2.3% Leisure 42 4%
• NWS Holdings Limited, AIA Group TOTAL 1,138 100%
year-on-year.
Limited and China Capital Zhongcai
The Consumer and Business Services Fund Management Co., Ltd. together
were the key sectors for foreign invested USD 500m in online
investment, accounting for around 70% healthcare firm We Doctor Group
CHINA
of total foreign investment in the first Limited – announced in May 2018 MID-MARKET VOLUMES BY SECTOR
half of 2018, followed by Industrials & • China FAW Group Corporation,
Chemicals. Inbound investments in the together with Tus-Holdings Co., 2017 2018
technology sector increased in Q2 2018, Ltd. and Contemporary Amperex
particularly in e-commerce and Technology Co., Ltd., acquired
software companies. Chinese electric car start-up Byton 301
152
It is expected that the trend of inbound for USD 500m – announced in June
investment in Chinese high-tech 2018
companies will continue in the second • Multiple bidders (Sequoia Capital,
half of 2018. Tencent Holdings Ltd., Coatue 163
Management, L.L.C and Yunfeng 68
Capital) invested in online education
firm VIPKID for USD 500m – 141
announced in June 2018. 86
49
31
KENNETH YEO
DIRECTOR LOOKING AHEAD
kennethyeo@bdo.com.hk The latest BDO Heat Chart for 544
Greater China indicates that there
244
are a total of 1,138 deals planned or
in progress with 320 (28%) related
to Industrials & Chemicals and 218
(19%) related to TMT. Other key sectors
include Business Services, Consumer and
ALBERT SO Financial Services. 106
PRINCIPAL
38
albertso@bdo.com.hk 141
52
129
52
227 103

JAPAN
SMALL, KNOWLEDGE-INTENSIVE INDUSTRIES SET TO DRIVE FUTURE MID-MARKET ACTIVITY
Japan’s Top 10 deals came from a In the Consumer sector, deal volume
range of sectors but our research fell from 13 to seven compared with the
suggests that in the future smaller, previous quarter and these Consumer
more knowledge- intensive transactions did not figure in the Top
10 deals.
industries will drive the country’s
mid-market deal activity. The biggest value deal in Q2 was in the
Business Services sector and comprised
BIG PICTURE Looking at the breakdown of the deals in
the share exchange of NDS Co., Ltd. and
Q2 2018, there was no significant change
COMSYS Holdings Corporation.
• TMT and Industrials & Chemicals were compared with the previous quarter with
Q2’s top-performing sectors the TMT and Industrial & Chemicals sectors As a result of this transaction, COMSYS
accounting for more than 50% of deal now owns NDS as a subsidiary, and
• Real Estate and Leisure predicted to reap
volume. In Q2 2018’s top 10 deals, five took COMSYS is expanding its market share in
benefits of 2020 Olympic Games
place in the Industrial & Chemicals sector, the infrastructure networks market.
• Increased M&A activity is likely due to however the total value of those deals was
business succession issues and Japan’s Real Estate was not active in Q2, but there
less than 40% of the total value of the Top
ageing population. is a development in Japan which may
10 deals.
positively impact the sector in the future.
Regulation in the use of sustainable land in
KEY DEALS AND SECTORS
suburbs will be deregulated in 2022. As a
The key sectors in Q2 were TMT and result, large lots of land in the suburbs may
Industrials & Chemicals and they be available for residential use in 2022.
accounted for the majority of the quarter’s In addition, the number of households is
deal volume. expected to decline in 2023. These two
events might break Japan’s current
supply-demand balance of housing and
residential land.
80 8,000
70 7,000
60 6,000
VALUE (USD M)
VOLUME
50 5,000
40 4,000
30 3,000
20 2,000
10 1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 30
JAPAN

Consumer 23 12%
At this stage, it’s not possible to LOOKING AHEAD Business Services 21 11%
accurately assess the impact of these Financial Services 16 8%
changes on Real Estate M&A activity. The BDO Heat Chart suggests that three
Energy, Mining & Utilities 6 3%
sectors – TMT, Industrials & Chemicals,
So far in 2018 there have been three Real Estate 4 2%
and Pharma, Medical & Biotech – will
deals in Pharma, Medical & Biotech
be responsible for approximately 60% Leisure 3 2%
but the BDO Heat Chart forecasts 27
of transactions. Interestingly, these TOTAL 189 100%
transactions ahead. Japan currently has
sectors are not expected to be positively
issues with its declining birth rate and
impacted by the upcoming Tokyo 2020
ageing population, which may affect the
Olympic Games. The sectors expected
sector. No public data exists to help us
to reap the benefits of this event are JAPAN
understand the impact this will have on,
Real Estate and Leisure. In addition, MID-MARKET VOLUMES BY SECTOR
for example the nursing industry but it’s
M&A activity as a result of business
reasonable to assume that there may be
succession issues may pick up due to the 2017 2018
increased M&A activity in this sector in
large number of small companies with
future years.
no succession plan due to Japan’s falling
birth rate, the ageing population and the
lack of people wanting to take on the 56 29
responsibility of being a CEO.
15 2
3
23 6
SOICHIRO YASUO
KITANO UENO 11
PARTNER
kitano@bdo.or.jp y-ueno@bdo.or.jp
32
70
13 6
10
20
32
31 13

SOUTH EAST ASIA

M&A ACTIVITY STALLS IN Q2
M&A mid-market activity in South The most active sectors in Q2 2018 were
East Asia was lower in Q2 2018 Industrials & Chemicals, Business Services
compared to the previous quarter, and Real Estate, which together accounted
both in terms of the volume and for 54.7% of the total deal numbers in
Q2 2018. Industrials & Chemicals was the
value of the deals. A total of 64
most active sector with 17 deals, followed
deals were transacted during the
by Business Services and Real Estate, both
quarter compared to 71 deals in with nine deals.
BIG PICTURE
Q1 2018, representing a decrease
of 9.9%, with total values falling The top three deals were in the Financial
• Deal activity fell in both volume and Services, Industrial & Chemicals and
value compared to previous quarter to USD 3.4bn in Q2 2018 from
Energy, Mining & Utilities sectors. The
USD 5.1bn in Q1 2018. The Top
• Top 10 deals accounted for 61.8% of largest deal was the acquisition of a 99%
10 deals amounted to USD 2.1bn, stake in Safety Insurance Public Company
overall deal value in Q2 2018
representing 61.8% of the total deal Limited and an 80% stake in PT Asuransi
• Main focus of M&A activity remained in value for Q2 2018. Parolamas by Tokio Marine Holdings
Industrials & Chemicals sector.
The PE segment completed three deals Inc for a consideration of USD 387m,
in Q2 2018, four deals less than the followed by the acquisition of a 100%
corresponding period in 2017. PE formed stake in Sabah Forest Industries Sdn Bhd in
a small proportion of total M&A activity Malaysia by Pelangi Prestasi Sdn Bhd for a
for the quarter, representing 4.7% of consideration of USD 310m and finally the
the number of deals and 32.0% of the acquisition of a 90% stake in Lane Xiang
transaction value. Minerals Limited by Chifeng Jilong
Gold Mining Co., for a consideration of
USD 275m.

9,000
100
8,000
7,000
80
VALUE (USD M)
6,000
VOLUME
60 5,000
4,000
40
3,000
2,000
20
1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 32
SOUTH EAST ASIA

Consumer 80 17%
LOOKING AHEAD Energy, Mining & Utilities 44 9%
The main focus of M&A activities in the With South East Asia’s currencies Leisure 36 8%
region is in the Industrial & Chemicals weakened against the US dollar, investors
sector. This sector achieved the highest with predominantly US dollar income or Pharma, Medical & Biotech 31 7%
number of completed deals in 2017 with funding may continue to find assets and Real Estate 23 5%
a total of 81 and the sector remained the targets in the region attractive. TOTAL 465 100%
top performer in Q2 2018 with 17 deals.
Meanwhile, M&A activity in Business
Services, which was responsible for 49
deals in 2017, slowed down in Q2 2018 SOUTH EAST ASIA
CHINA
with only nine deals completed. MID-MARKET VOLUMES BY SECTOR
M&A activities in South East Asia remain
2017 2018
dependent on the current economic DATO’ FEIZAL
challenges faced by the region, which MUSTAPHA
includes the outlook on crude oil prices 36 14
CHAIRMAN
and the consequential fluctuation of
currencies in the region. feizal@bdo.my
18
12
14
9
25
7
81
37
33
17
34
10
36
12
49 17

AUSTRALASIA
WEAK M&A ACTIVITY IN Q2 2018 BUT STRONG PIPELINE
INDICATES A HEALTHY SECOND HALF OF THE YEAR
A total of 79 deals, with a combined Mid-market PE transactions declined in Q2

deal value of USD 5.1bn, were 2018, with four deals completed compared
successfully completed in Q2 2018. to 11 in Q2 2017. PE deal transaction values
This represented a 4% decline on Q1 for the quarter increased from USD 72m
to USD 103m from the corresponding
2018’s deal volume of 82 and a 1%
quarter in 2017. While the number of mid-
decline in total value compared to
market PE deals has declined compared to
the corresponding quarter in 2017. previous quarters, the general consensus
BIG PICTURE
The average transaction value for Q2 2018 indicates that PE deal-making will rise
• Q2 2018 deal volume fell 14% compared was USD 64m, 15% higher than Q2 2017. in the coming quarters. This is due to a
to Q2 2017, but average deal value This indicates there is still an appetite healthy economic outlook, strong liquidity
increased by 15% to USD 64m for large mid-market deals which have coming from banks and record levels of
strategic value. dry powder, which are their highest levels
• PE activity remained weak with only
since 2008.
four deals completed in Q2 2018 but The largest drop in deal volumes by sector
sentiment and outlook for PE is positive was in Business Services, which was down KEY DEALS
• Australasia continues to be a favourable 27%. The only sector to record positive
The largest deal in Q2 2018 was the
destination for foreign buyers, with five deal volumes was Financial Services, up
acquisition of OnePath Life (NZ) Limited
of the top 10 deals completed by 167% compared to the corresponding
by USA’s Cigna Corporation for USD 484m.
foreign firms quarter in 2017. This sector also accounted
The strategic motivation for the sale by the
for the largest deal in Q2 2018.
• Strong M&A pipeline of 550 deals Australia and New Zealand Bank Group
indicates an active second half in 2018. (ANZ) was to continue exiting non-core
operations and simplify its business
operations. The deal included a 20-year
strategic alliance, which ANZ believed
offered greater value to its customers
8,000
120
7,000
100
6,000
VALUE (USD M)
80
VOLUME
5,000
60 4,000
3,000
40
2,000
20
1,000
0 0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ISSUE 3 | 2018 34
AUSTRALASIA

Consumer 97 18%
via a specialist insurance provider. The LOOKING AHEAD Energy, Mining & Utilities 71 13%
second largest deal was the acquisition Financial Services 55 10%
of Adshel Street Furniture Pty Limited by The current pipeline shows that the Pharma, Medical & Biotech 41 7%
Australia’s listed oOh!Media Limited for appetite for mid-market M&A deals
USD 423m. This transaction has created heading into H2 2018 is strong, with 550 Leisure 28 5%
one of Australasia’s largest outdoor media deals underway, up on the 519 deals in Real Estate 10 2%
companies and provides a significant Q1 2018. The BDO Heat Chart indicates TOTAL 550 100%
avenue for future revenue growth. that the TMT and Consumer sectors are
expected to see the most M&A activity
Other notable deals that featured in
in H2 2018, with 103 and 94 deals
the mid-market Top 10 included the
respectively. AUSTRALASIA
acquisition of Tegel Foods Ltd for USD
411m by Philippines Bounty Fresh Food Activity in the Business Services and
Inc.; the USD 345m acquisition of Airwork Energy, Mining & Utilities sectors has
2017 2018
Holdings Limited by China’s Zhejiang Rifa strengthened relative to Q1 2018, with
Holding Group Co., Ltd and Hangzhou the BDO Heat Chart showing 71 deals
38 12
Financial Investment Group Co., Ltd; each in the pipeline. Overall, it represents
and the USD 255m acquisition of Atlas 1
one of the strongest mid-market
9
Iron Limited by Hancock Prospecting Pty pipelines we have seen in recent years,
Ltd. Inbound investment and interest in which bodes well for a strong second half 19
35
Australasia companies remains high, with of 2018.
five of the Top 10 deals having foreign
bidders from outside the region. Energy,
Mining & Utilities remains a heavily 45 19
targeted sector with four of the 10 top
deals completing in this space.
DANIEL
66
MARTIN 27
ASSOCIATE
daniel.martin@bdo.co.nz
19
13
57
31
58
21
86
18

ISSUE 3 | 2018 36
SECTOR VIEW P37

RENEWABLES
GLOBAL RENEWABLES
INVESTMENT REBOUNDS IN
2017 WITH STRONG YEAR AND
STORAGE TECHNOLOGIES
LOOK SET TO DRIVE FUTURE
M&A ACTVITY
P39
REAL ESTATE
GLOBAL SLOWDOWN
IN REAL ESTATE ACTIVITY
AMID ECONOMIC AND
POLITICAL TENSIONS
P41
RETAIL
RETAIL INVESTORS EYE UP

OPPORTUNITIES AS SECTOR
FACES TESTING TIMES
RENEWABLES
GLOBAL RENEWABLES INVESTMENT REBOUNDS
IN 2017 WITH STRONG YEAR AND STORAGE
TECHNOLOGIES LOOK SET TO DRIVE FUTURE
M&A ACTVITY
BIG PICTURE
• Globally solar and wind investments continued to steal the show
• Lower renewable activity in Europe weighed on otherwise strong
global growth
• Storage technologies are maturing, pointing towards increased
deployment with established technologies and also driving M&A.
Global investment in renewables (spanning PROJECT FINANCE M&A

project finance, venture capital and private Globally, project finance for new assets in Institutional investor confidence in
equity and public markets) rebounded in 2017 rebounded strongly in the year, rising renewables as a private asset class
2017 with overall investment rising to USD by 30% compared to 2016 to a second- continued to drive M&A activity, which
300bn and in so doing posting the fourth best yearly figure of USD 231bn. grew for the fifth year in succession to
strongest year in terms of spend since 2009. stand at USD 140bn, with Europe leading
This was the picture almost everywhere
This rise in activity however was not the way with deals reported worth USD
with the notable exception of Europe,
reflected evenly across the globe with 44bn, an increase of 24% year-on-year.
where despite a strong continued showing
strong growth being posted in most Rather predictably, wind and solar
in solar (+71%) and onshore wind (+17%),
regions masking a slightly deteriorating transactions together dominated the bulk
project finance investment fell overall due
position in Europe. of all deal activity with more than 70GW
to a halving of investment in offshore wind
of capacity changing hands at a value of
The North American market led the way to USD 8.4bn.
almost USD 73bn.
with a 27% increase in investment year-
on-year, rising to USD 80bn, while in terms GREEN BONDS AND
PUBLIC MARKETS THE FUTURE
of volume the Asia Pacific region recorded WHAT’S IN STOR(AGE)?
investment of USD 115bn with strong The Green bond markets continue to
As energy storage technology continues to
individual performances from Australia, mature year-on-year and have posted
mature, developers are now increasingly
South East Asia and China. continued quarterly increases for almost
looking to deploy storage alongside other
three years. Spending in 2017 breached
Much of this spend centred around forms of renewables to maximise returns,
USD 100bn for the first time, reporting
continued growth in onshore wind that especially in subsidy-free environments.
a strong finish at USD 128bn, with
saw overall investment of USD 141bn, a almost half of all money raised on Energy storage M&A transactions emerged
USD 24bn increase from the previous year. European markets. from the shadows with almost USD 3bn
Solar investment amounted to USD 116bn, spent on deals in 2017, which also saw a
a small decrease in the year. Despite this strong showing, new IPOs
number of significant strategic alliances
and secondary offerings were significantly
being announced including a JV between
down in 2017, posting the lowest figures
AES and Siemens.
since 2012.
ISSUE 3 | 2018 38
GLOBAL CLEAN ENERGY TOTAL INVESTMENT BY REGION 2009 TO 2017

400
350
This should be seen against a backdrop 300

of generally lower VC/PE activity in the
Deal value ($billion)
wider clean energy market which in 2017 250
struggled to breach USD 6bn, over 30% 200

down on the year and the second worst
performance since 2009. Volumes have 150
recovered somewhat into 2018. 100
As governments increasingly legislate 50

in favour of electric vehicles and
car manufacturers move away from 0
2009 2010 2011 2012 2013 2014 2015 2016 2017
conventional engine technologies, we
Asia Pacific Europe North America Latin & Central America Africa & Middle East
are seeing M&A increase along the whole
supply chain and both Shell and BP have
recently announced acquisitions to try to GLOBAL CLEAN ENERGY PROJECT FINANCE BY SECTOR 2009 TO 2017
establish early dominance of the charging 300
networks and infrastructure in Europe.
Other PE houses known to BDO are 250
already taking strategic equity positions
to take advantage of further industry 200
Deal value ($billion)
consolidation.
150
100
JAMES 50
THOMAS
DIRECTOR 0
2009 2010 2011 2012 2013 2014 2015 2016 2017
james.thomas@bdo.co.uk Wind Solar Biomass Other

DEAL ACTIVITY BY CONTINENT

Q2 2018 saw a reversal of the peak
achieved in the quarterly global real
estate transactions that occurred in Q4
2017. Following an explosive 2017, the
market conditions which underpinned
this growth have slowed down and are
beginning to revert to pre-2017 levels.
REAL ESTATE The macroeconomic factors driving this

include a combination of successive US
GLOBAL SLOWDOWN IN REAL ESTATE ACTIVITY interest rate hikes, renewed political and
economic tensions between major global
AMID ECONOMIC AND POLITICAL TENSIONS players and a general hangover following
the heightened activity that took place
in 2017.
Entering its fifth year of the Belt and
Road initiative, the Chinese market
appears to be following the global trend
in declining quarterly transactions. The
SEBASTIAN Chinese economy is beginning to show
STEVENS signs of slowing amongst rising debt
PARTNER
levels and worsening trade tensions
sebastian.stevens@bdo.com.au with the US. Declining M&A activity
CHINESE REAL ESTATE M&A ACTIVITY across the strongest real estate region
70
is representative of what is happening
across the globe. The traditional real
60 estate hubs of Europe, North America and
Australasia were relatively consistent in
50 their decline throughout Q2 2018.
40
Asia continues to prop up M&A real estate
global deal activity, accounting for 76%
30 of all transactions so far in 2018, which
is relatively consistent with previous
20 quarters. It is yet to be seen whether or
not this can be maintained as geopolitical
10 tensions within the region may escalate
amongst further fears of a worsening
0
US-China trade war.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017 2018
Number of real estate deals Rolling average
ISSUE 3 | 2018 40
The Chinese real estate market appears to KEY DEALS

be slowing down following its explosive A number of prominent deals were completed in the real estate sector in Q2 2018:
growth in Q4 2017, in line with global
trends, as the number of deals effectively EUROPE NORTH AMERICA
halved in Q2 2018. However, the next • Teixeira Duarte, a Portuguese • Spirit Realty Capital, Inc. sold Spirit
largest jurisdiction, South East Asia, saw company, sold Lagoas Park, S.A. to UK- MTA REIT to the shareholders of Spirit
an increase in Q2 2018 compared to the based private equity Kildare Partners Realty Capital, Inc. as a spin-off (NYSE:
same period in the previous year. for USD 438m SMTA) for USD 416m.
Europe has historically been the second • Mobimo Holding AG, a Swiss-based
ASIA AND AUSTRALASIA
most active continent since 2014. company, conducted a friendly
However, activity begun to slow down takeover of fellow Swiss-based • In a Chinese transaction, CCOOP
in Q2 2018 after enjoying a strong 2017, Immobiliengesellschaft Fadmatt AG for Group Co., Ltd. sold Heilongjiang
posting a 46% drop in deals in the first USD 367m Province Xinhezuo Property Co., Ltd. to
half of 2018 compared to the same period Harbin Pinzhi Investment Co., Ltd for
• In an Austrian transaction, RPR USD 440m
in 2017. There were a notable number
Privatstiftung sold a 22% share of
of large value real estate transactions in • Singapore-based Reco Yizhong Private
Immofinanz AG to S IMMO AG for
the DACH region in Q2 2018, which are Limited sold a 40% stake in Yanlord
USD 361m
discussed outlined below. Property Pte Ltd. to China-based
• US-based private equity fund, Apollo Yanlord Land Group Limited for
A slight decline in the number of real Global Management, LLC. purchased
estate deals in North America continued USD 158m.
Germany-based Fair Value REIT-AG for
the global trend. This may be driven by USD 264m.
the current political uncertainty in the
US, increased friction with global trade
DEAL ACTIVITY BY CONTINENT
partners as well as successive interest
rate hikes by the Federal Reserve from Q4
2017 onwards. 120
Overall, Q2 2018, continued the global 100

reversal in real estate-based M&A activity
following the conclusion of an explosive
80
Q4 2017. This trend may continue if the
Transactions
macroeconomic environment dictating

60
these deals remains, or worsens. It will
be interesting to see whether China
40
can continue to prop up the market
and maintain its high proportion of
20
deals conducted.
0
Q3 17 Q4 17 Q1 18 Q2 18
Europe Middle East North America South America Asia Australia

ISSUE 3 | 2018 42
RETAIL
RETAIL INVESTORS EYE UP OPPORTUNITIES AS SECTOR FACES TESTING TIMES
RETAIL NEWS IN THE LAST SIX MONTHS HAS NOT BEEN POSITIVE
The deadlines have been dominated by store closures as the likes of House of
Fraser, Poundworld and The Original Factory Store announced that large numbers
of stores are to close across their portfolios.
These high street casualties have quite rightly caught Amazon is a great example of this. From very early on
the headlines – closing such significant numbers of it has used acquisitions to grow quickly in the areas
stores on the high street has many impacts, not least it identified it needed to move faster in. Way back in
for the thousands of employees who find their jobs at 1998 it made a number of acquisitions including the
risk as a result. Internet Movie Database (IMDB) and from there on in
has made almost 100 acquisitions in various direct or
With so much bad news around, it is easy to get
complementary areas to accelerate its growth. In this
caught up in the belief that all retail is destined to fail
quarter alone it has made four acquisitions including
and that the sector as a whole should be avoided from
acquiring PillPack, a US-based pharmacy that fills,
an investment perspective at all costs.
sorts and delivers clients’ medications, for USD 1bn
However, I believe this couldn’t be further from the in June 2018.
truth. People are still consuming and consumer data
The Hut Group is another example of growth through
shows that although spending growth has levelled off,
consolidation and this quarter was no exception, as it
it is not yet decreasing. Although retailers struggled
acquired M Beauty (trading as Eyeko) in May 2018.
in the UK in the early months of the year, mainly due
to the unseasonal weather, according to Visa’s UK If retailers are not innovating or diversifying their
Consumer Spending Index, May and June returned offerings then there are still big deals to be done
to growth with household spending on clothing and to take advantage of synergies and regain some
footwear increasing by 0.5% and household goods competitive advantage through cost savings. This
by 1.45%. quarter saw Sainsbury’s announce its acquisition of
ASDA in April for USD 9.8bn. Combining the two
Obviously, retail is facing huge challenges. There is a
businesses will also generate opportunities form
perfect storm for bricks and mortar retailers, which
cross-fertilising the customer base.
is intensifying year-on-year: increases in business
rates, the living wage and lower footfall have all Finally, private equity is still interested in and making
hit profitability. The biggest impact though, is the investments in the sector. Although the bar on
structural shift from bricks and mortar to online. The ‘appropriate consumer deals’ nudges ever higher,
way we are shopping is changing fundamentally. This there are still many deals to be done as the wall of
is a global trend and the adjustment has not money ready to invest from PE remains strong. This
yet finished. quarter saw LDC invest in the fast-growing licencing
business Paladone, Kester Capital acquire Jollyes pet
However, this provides a perfect opportunity for
store and Elliot Advisors invest in Waterstones.
growth for emerging brands and innovative disruptors
who aren’t encumbered by a legacy store portfolio. And Waterstones is a great deal to end this piece
Their agility means they can adapt to the changing on. It’s a fantastic example of why you should
spending habits quickly and tailor their offering to never write retail off – if you give people the right
appeal to the modern consumer. For many of these proposition, they will buy. In 2011 when James Daunt
businesses, their growth over the last four or five years was appointed CEO the book retailer reported a USD
has been strong. 43.2m loss. Roll forward seven years and the most
recent set of accounts show that loss has turned into
Even if consumer demand isn’t showing an overall
an USD 24m pre-tax profit.
increase, the rapid switch from store to online
means that they can take customer share away from Retail is undeniably facing
traditional retailers struggling to keep up. The total
sales of M&S (just clothing & home) and Next for the challenges, but it is still a great place
year ending 2018 for example was USD 10.3bn – that to invest in winners.
represents a large market to aim for.
Larger, traditional retailers can see this trend and the
more forward-looking ones are keen to innovate and
adjust to stave off the competition. One of the fastest
ways to achieve this is through acquisition.
All of this has resulted in a feast of M&A activity and
investment interest in the sector. NICOLA SARTORI
MANAGING DIRECTOR
nicola.sartori@bdo.co.uk
FOR MORE INFORMATION: Data compiled by Acuris.
We focus on the middle market, defined as deals with a value from $5m to $500m
in US Dollars.
SUSANA BOO
BDO International Limited is a UK company limited by guarantee. It is the governing
+44 (0)20 7893 2316 entity of the international BDO network of independent member firms (‘the BDO
susana.boo@bdo.co.uk network’). Service provision within the BDO network is coordinated by Brussels
Worldwide Services BVBA, a limited liability company incorporated in Belgium with
its statutory seat in Brussels.
Each of BDO International Limited, Brussels Worldwide Services BVBA and the
member firms of the BDO network is a separate legal entity and has no liability for
another such entity’s acts or omissions. Nothing in the arrangements or rules of
the BDO network shall constitute or imply an agency relationship or a partnership
between BDO International Limited, Brussels Worldwide Services BVBA and/or the
member firms of the BDO network.
BDO is the brand name for the BDO network and for each of the BDO member firms.
© Brussels Worldwide Services BVBA, 2018.
www.bdo.global
www.bdohorizons.com
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HORIZONS

MERGERS&ACQUISITIONS ISSUE 3 | 2018

VIEWS FROM RENEWABLES

In our first HORIZONS issue of INSIGHTS FROM A LEADING M&A ADVISER

GLOBAL BDO HEAT CHART

China 218 320 121 132 95 60 103 42 47 1,138 14%

CEE & CIS 129 150 95 58 36 52 53 28 12 613 7%

Southern Europe 117 111 124 80 29 40 47 35 7 590 7%

South East Asia 70 75 80 69 31 44 37 36 23 465 6%

Australasia 103 74 97 71 41 71 55 28 10 550 7%

UK & Ireland 120 42 54 56 26 35 63 16 11 423 5%

Latin America 65 76 50 53 18 63 32 17 4 378 5%

DACH 53 121 41 39 23 18 25 8 3 331 4%

Other Asia 63 87 36 12 48 11 23 13 2 295 4%

It remains to be seen to what extent

The date of 9 May 2018 Pakatan Harapan (PH), or the ‘Alliance of

P07 | NORTH AMERICA

P09 | LATIN AMERICA

RENEWABLES P37 REAL ESTATE P39 RETAIL P41

P11 | UNITED KINGDOM & IRELAND

P15 | BENELUX P17 | DACH

P21 | CEE & CIS

P31 | SOUTH EAST ASIA

Note: The colouring illustrates the movement of expected transactions

800 PE/TRADE VOLUME & VALUE 80,000

Technology & Media 562 23%

Technology & Media Financial Services

Latin America’s mid-market KEY DEALS AND SECTORS

POLITICAL AND retaining the resources in the US. This

UNITED KINGDOM & IRELAND

After a dip in activity in Q1 2018, it KEY DEALS AND SECTORS

300 PE/TRADE VOLUME & VALUE 20,000

UNITED KINGDOM & IRELAND

Technology & Media 120 28%

Technology & Media Financial Services

The number of PE deals declined KEY SECTORS

250 PE/TRADE VOLUME & VALUE 20,000

KEY DEALS FOCUS ON ITALY: SOUTHERN EUROPE

60 PE/TRADE VOLUME & VALUE 6,000

Technology & Media 49 24%

Technology & Media Financial Services

PE/TRADE VOLUME & VALUE

Industrials & Chemicals 121 37%

Focusing on deal activity across most Pharma, Medical & Biotech 23 7%

Technology & Media Financial Services

The number of total Nordic M&A CROSS-BORDER IN FOCUS OF

120 PE/TRADE VOLUME & VALUE 9,000

Technology & Media 45 24%

Technology & Media Financial Services

CEE & CIS

180 PE/TRADE VOLUME & VALUE 16,000

CEE & CIS

Industrials & Chemicals 150 24%

A total of 13 deals, with a combined In Q2 2018, PE was responsible for one

30 PE/TRADE VOLUME & VALUE 2,500

Technology & Media 40 50%

70 PE/TRADE VOLUME & VALUE 6,000

Technology & Media Financial Services

700 PE/TRADE VOLUME & VALUE 6,000

Industrials & Chemicals 320 28%

Technology & Media Financial Services

90 PE/TRADE VOLUME & VALUE 9,000

Technology & Media 48 25%